Lease Accounting Software

Lease Right Of Use 1

Lease Accounting Software

Effective date:

  • Lease Accounting as per Ind AS 116 – Mandatory effective date 1st April 2019 replacing the earlier Ind AS 17

Highlights:

  • Leases are recognized in the balance sheet as a ‘right-of-use’ asset and a ‘lease liability’.
  • Provides exemptions for short-term leases and leases of low value items. User can define asset classes for availing exemption as per the asset class
  • Different modes of payment – Monthly, Quarterly, Half-yearly or Yearly either at the beginning of the period or at the end of the period can be handled by the system
  • Computation of Right-of-Use, Amortisation, Lease Liability, imputed income from interest-free deposits with complete accounting entries for the entire life of the lease
  • All Accounting entries are generated on the fly with ability to see key account balances at every reporting date
  • Disclosures provided as per the requirements of the Accounting Standard

Data upload:

  • Lease data and lease deposit data imported from a file
  • Initial indirect cost, costs of removal and restoring, lease incentives and residual value guarantee data all captured by the system
  • Input the risk-free rate and the credit rating of the counterparty to compute the imputed interest income from lease deposits with reduced or no interest

System highlights:

  • Cloud-based application with full security
  • Three User Profiles provided in the Customer Portal:
  • Accountant role – Multiple accountants can enter the data. Each accountant can view or edit the data uploaded by her/him
  • Manager role – Manager login responsible for the processed output, who can view and edit all data entered by any accountant. Manager can process the data and generate all reports
  • Auditor role – Auditor login to view all the input data and reports available in the system. Can view the entire audit trail for all transactions
  • Dashboard giving details of the Right-of-use, amortization, lease liability, imputed income and finance charges for any given lease or all leases

Lease modifications:

  • Lease modifications automatically computed by the system based on the input data
  • Impact on right-of-use asset and lease liability is generated by the system along with modifications in the amortization
  • Previously generated accounting entries are reversed, and new entries passed by the system

Implementation:

  • Transition methods – Full retrospective, modified retrospective approach #1 and modified retrospective approach #2 available on a lease by lease basis
  • Accounting entries can be exported to the user’s accounting system

Pandemic Concessions:

  • Amendments pertaining to COVID-19 concessions are incorporated into the system

Lease accounting, lease period extended after year 1 – Journal entries

Lease accounting, lease period extended after year 1 – Journal entries Details for lease accounting for lease extension Let us assume the following details for lease accounting: Lease start date: 1-Apr-2019 Lease end date: 31-Mar-2024 Lease payments: Rs. 2,75,000 Payment frequency: Annual – payable at the end Incremental borrowing rate: 9% Lease extension on 1-4-2020: Lease Modification effective date: 1-Apr-2020 Lease end date extended up to: 31-Mar-2026 All other terms remain the same When the lease is modified without any increase in the scope of the lease then lease liability and the right-of-use are recomputed on the effective date of such modification. This would result in amortising an additional amount and the …
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Steps in lease accounting Details for lease accounting Let us assume the following details for lease accounting as per Ind AS 116 Lease start date: 1-Apr-2019 Lease end date: 31-Mar-2024 Lease payments: Rs. 2,75,000 Payment frequency: Annual – payable at the end Incremental borrowing rate: 9% Step 1: Calculate the right-of-use The right-of-use is first calculated as follows: Step 2: Prepare amortisation schedule The amortisation schedule based on straight line method is calculated as follows: Step 3: Calculate Lease Liability The lease liability is computed as follows: Step 4: Calculate the finance charges The finance charges for the lease liability is calculated as follows:
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Lease Accounting as per IFRS 16 vs. AS 19

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Lease modifications

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